By Isaac Cohen*
The recognition that the US economy is strong and that inflationary pressures are high may lead to bigger reductions in asset purchases by the central bank, at the next meeting of December 14-15. The new reductions may reach $30 billion per month, to end the purchasing program in March, instead of June.
This turn toward a tighter monetary policy is warranted also given the decline to 4.2 percent in the unemployment rate in November, from 4.6 percent in October, which is close to pre pandemic rates. However, despite the weakest monthly job creation this year of only 210,000 new jobs in November. job creation was strong in some sectors, such as increases of 31,000 each in construction and manufacturing and 50,000 in transportation. Disappointing sectors in November were retail, which lost 20,000 jobs, while leisure and hospitality hired only 23,000 new workers, from 170,000 in October.
The central bank had said that it was willing to tolerate a higher inflation rate, above its 2 percent objective, until the job market regained the strength it lost during the pandemic. As employment is approaching pre pandemic levels, the central bank must turn to stop inflation, except if the new variant Omicron of the coronavirus increases contagion and forces another drastic closure of economic activities.
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.